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"Exasperated" could describe Pequot Lakes City Council members after they learned Tuesday, Aug. 15, that the city might not take ownership of - or receive payment for - roads that are part of the Highway 371 improvement project as soon as anticipated.

The city's 2018 budget is being built around receiving $4.6 million from Crow Wing County to take over ownership and maintenance of several miles of road after the Highway 371 four-lane expansion project is complete.

Specifically, the city will take over about 6 miles of new roadway:

• Patriot Avenue, the new name for the former two-lane Highway 371 from County Roads 107/168 south of the city to County State Aid Highway 17 north of the city (through downtown Pequot Lakes). Technically, the Minnesota Department of Transportation will pay Crow Wing County for Patriot Avenue, and the county in turn will pay the city to take over the current state roadway.

• Main Street, the new name for CSAH 11 from the new interchange with Highway 371 to the west.

• Rasmussen Road, the new name for County Road 112/Old Highway 371 from the intersection with Derksen Road south of Pequot Lakes to the new extension of CR 17 north of town.

The city anticipated the road exchanges to take place by April 1, 2018, but learned that now could be extended to as late as Nov. 1, 2018, city administrator Nancy Malecha told the council Aug. 15. The council was meeting to consider - and eventually approved - the 2018 preliminary budget.

"It totally messes up the budget," mayor Nancy Adams said of the delayed road turnbacks.

Council members asked Malecha to send a letter to MnDOT saying that waiting until Nov. 1, 2018, to turn over the roads to the city hurts the city. They directed the letter to say that if the roads aren't turned back to the city by May 1, 2018, then the city won't accept them until May 1, 2019.

Malecha explained that the city planned to hire another staff person for the streets department as well as equipment to maintain the additional roads, which are reflected in the proposed 2018 budget. Delaying the road turnbacks also would affect a planned Trailside Park improvement project scheduled to start in spring 2018 because the project includes part of Patriot Avenue in the middle of town, so the city needs to own the roadway.

Adams asked if the council could keep the preliminary budget that anticipates receipt of the $4.6 million for the roads; and if the city doesn't get the roads and money until November 2018, could the city not buy what isn't yet needed and, therefore, not use the money.

Malecha said the council could set aside and designate funds for a specific purpose, and if those funds get forwarded to the 2019 budget, the city won't need to levy so much that year.

Preliminary levy approved

In the end, the council approved the preliminary tax levy of $1,688,705 that assumes the city will receive the $4.6 million, knowing that the council can lower - but not raise - the levy before final adoption in December.

That preliminary tax levy represents a $91,475 levy increase, or 5.73 percent, from 2017, and an estimated tax rate increase of 1.592 percent.

The council had directed department heads to compile 2018 budgets using a 1 percent tax rate increase and no increase in operating costs, which does not include capital outlay expenditures and wages and benefits.

The Roads & Streets Department had the highest budget increase at $65,000 more than this year, because of the additional roads.

Also, the council talked about a budgeted $200,000 in 2017 for a new truck for the streets department to maintain the additional roads, and that truck hasn't been ordered yet. It must be ordered nine months in advance.

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Budget increases

Proposed budget increases over $2,500 include:

• Employee wages: The budget reflects a 3.5 percent increase for employees, in addition to the new employee in the Roads & Streets Department beginning in July 2018.

• Health insurance: The budget reflects a 5 percent increase for health insurance premiums, but City Administrator Nancy Malecha told the council she has since learned that rates will increase nearly 9 percent, or another $4,600, which needs to be included in the budget.